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Hamish McRae: A grave new world awaits us if we don’t manage migration

Hamish McRae: One aspect of globalisation causes the greatest tension — the movement of people: Getty Images
Hamish McRae: One aspect of globalisation causes the greatest tension — the movement of people: Getty Images

Who is going to win: economics or politics? Put another way, does the populist revolt sweeping the world mean globalisation will be reversed?

Donald Trump was elected on the back of nationalist populism. Theresa May will get her big majority partly because of her rejection of the globalist agenda of Tony Blair and David Cameron. Beyond the developed world, populism has been harnessed by elected leaders such as Vladimir Putin and Recep Tayyip Erdogan. One sentence from May caught the power behind the revolt with brutal clarity: “If you believe you are a citizen of the world, you’re a citizen of nowhere”.

The forces behind the rise in populism have been brilliantly analysed by David Goodhart in his book The Road to Somewhere, published in March. In it he describes how greater economic openness in the West has not benefited all its citizens.

The effect is that there is a now a new divide between the mobile people who feel they can achieve their own identity as global citizens — the people from Anywhere — and those who identify with their roots and feel marginalised, the people from Somewhere.

There are two sides to the revolt. It is partly political, a desire “to have our country back”. But it is also economic, a push against some aspects of a more global economy. Of course they are interlinked. But looking at the economics, nearly everyone wants the benefits of globalisation, such as an iPhone made in China, even if they resent immigration from Mexico or the Continent.

That prompts a huge question: can globalisation continue economically while it’s being rejected socially?

This is the theme of a book Grave New World, The End of Globalization, the Return of History, by Stephen D King, senior economic adviser to HSBC.

Until recently, most in the West, whatever their views as to its benefits or costs, believed globalisation was inevitable. Kofi Annan, former UN secretary-general, put it this way: “It has been said that arguing against globalisation is like arguing against the laws of gravity.”

But now globalisation is stuck. Take a simple measure: for the past three or four years international trade has no longer been rising as a proportion of global GDP. In fact it has fallen back a little. We also know what happened to the last great burst of globalisation at the end of the 19th century. Anyone with a sense of history can pick up many uncomfortable parallels with the world of 1914 and today, including the rise of an aggressive Germany then compared with the rise of China now.

King argues that if the US retreats from its overall support for globalisation, the progress of the past half-century is threatened. “Successful globalisation,” he writes, “cannot be just a market-driven process. It must also involve cross-border sponsorship of both ideas and institutions… In the absence of firm US leadership — and persistently weak economic activity in the developed world — is there any future in western-style globalisation? It is tempting to suggest not.”

He argues that the West has to defend globalisation by highlighting the inconsistencies in the arguments of its detractors. For example, those who oppose the World Trade Organisation have to explain why the old world in which small countries could not challenge import restrictions by big ones (he quotes Ecuador tackling the US over a ban on imports of shrimps) was somehow better. But he ends by saying that if the views of those who favour insularity and protectionism prevail “it really will be a Grave New World”.

Too gloomy? Well I suppose the key questions are, first, whether we face a gradual slide into greater trade restrictions or, worse, tit-for-tat import controls; and second, whether once the present tensions are resolved, globalisation can resume its upward path.

Part of the problem is that memories of the pre-globalisation world fade. How many people in the UK remember that, until 1979, you were restricted on how much currency you could take when you went on a foreign holiday?

Most of our new freedoms we take for granted: the ability to buy foreign goods, or to move money to friends or family abroad. There is understandably huge resentment against companies that use such freedoms to avoid paying tax in the countries where they do much of their business, but that is really a flaw in tax law rather than in globalisation itself. There is, of course, concern when firms shift production to countries where labour is cheaper, but anyone who opposed that has to answer the question: do we really want to be a cheap-labour economy?

Where competition seems unfair — for example, when a foreign company receives government subsidies — there are measures to tackle this.

But one aspect of globalisation causes the greatest tension — the movement of people. Goods, services and money can tolerably move around freely. But people no.

All countries to some extent restrict migration and the question is how to order migration to the benefit of the largest number of people.

Indeed if countries could manage migration more effectively, that would do the most to persuade electorates to support globalisation generally. Otherwise I’m afraid we might move towards a graver new world economy.